2023 Assembly Bill 43 (LRB-1948/1)
REPORT
STATE OF WISCONSIN
JOINT SURVEY COMMITTEE ON TAX EXEMPTIONS
2023 ASSEMBLY BILL 43 / 2023 SENATE BILL 70
[Introduced by Joint Committee on Finance, by request of the Governor]
This report relates to 2023 Assembly Bill 43 and its companion 2023 Senate Bill 70 (each
companion may be referred to individually as the “bill”), concerning state finances and
appropriations, constituting the executive budget bill.
GENERALNATURE ANDFISCALEFFECTOFTAXEXEMPTION
PROVISIONS IN THEBILL
Marijuana Legalization
Current law prohibits a person from manufacturing, distributing, delivering, or possessing
marijuana. The bill changes state law to allow the recreational use of marijuana and to impose
an excise tax of 10 percent of the sales price on each retail sale of marijuana.
1
Additionally, current law imposes a sales and use tax on retail sales of tangible personal
property. The tax is not collected on sales of illegal goods; however, sales of recreational
marijuana are subject to sales and use tax under the bill.
The bill also requires the Department of Revenue (DOR) to create and maintain a medical
marijuana registry program whereby an individual may obtain a registry identification card and
a tax exemption certificate. The individual must be a qualifying patient, and they must have a
written certification from their physician. Under the bill, any retail purchase of marijuana by the
individual is exempt from the 10 percent excise tax, and the imposition of sales and use tax,
while the tax exemption certificate is valid.
The bill defines a “qualifying patient” as a person who has been diagnosed by a physician as
having or undergoing a debilitating medical condition or treatment, but not including a person
under the age of 18 years. The bill defines a “debilitating medical condition or treatment” as any
of the following: (a) cancer, glaucoma, acquired immunodeficiency syndrome, inflammatory
bowel disease (including ulcerative colitis or Crohn’s disease), a hepatitis C virus infection,
Alzheimer’s disease, amyotrophic lateral sclerosis, nail patella syndrome, Ehlers-Danlos
Syndrome, post-traumatic stress disorder, or the treatment of these conditions; (b) a positive
test for the presence of HIV, antigen or non-antigenic products of HIV, or an antibody to HIV,
or the treatment of these conditions; and (c) a chronic or debilitating disease or medical
condition, or the treatment of such a disease or condition, that causes cachexia, severe pain,
severe nausea, seizures, including those characteristic of epilepsy, or severe and persistent
muscle spasms, including those characteristic of multiple sclerosis.
1 2023 Spill Draft LRB-0405/P3 (marijuana legalization). - 2 -
The Administration has indicated that it does not estimate a fiscal effect associated with the
taxation of retail sales of recreational marijuana until 2024-25. In that year, and annually
thereafter, the Administration estimates such taxation would generate revenue of $32.7 million
(with $22.5 million from the 10 percent excise tax, and $10.2 million from the sales and use tax)
from retails sales of recreational marijuana in the state. The state would forgo certain additional
revenue as a result of tax-exempt sales of medical marijuana to registrants who have obtained a
tax exemption certificate, as described above, to the extent the sales otherwise would have been
sales of taxable recreational marijuana. The amount of additional revenue from taxation of these
potential additional sales in the absence of the tax exemption is indeterminate.
Wisconsin Housing and Economic Development Authority (WHEDA)
Headquarters
Current law imposes a tax on all general property in this state, unless an exemption applies, as
specified in the statutes. The bill creates an exemption for land and buildings owned by WHEDA
and used as its corporate headquarters, including associated parking facilities. The exemption
would first apply to assessments as of January 1, 2023.
2
In the most recent property tax year, the corporate headquarters was assessed at a value of
$18.8 million and had a net tax bill of $372,642. The bill would result in tax levies being shifted
to other properties within the taxing jurisdictions in which corporate headquarters, at 908 East
Main Street in Madison, is located.
Gender-Neutral References
The bill makes applicable to married persons of the same sex all provisions under current law
that apply to married persons of different sexes.
3
There are no fiscal effects resulting from the
application of gender-neutral references to any tax exemption related provisions.
Exemption for Energy Systems
Current law imposes a sales and use tax on retail sales of tangible personal property and
electricity; however an exemption from the tax is provided for certain products sourced from
wind energy, direct radiant energy received from the sun, or gas generated from anaerobic
digestion of animal manure and other agricultural waste, that are capable of producing at least
200 watts of alternating current or 600 British thermal units per day; and the exemption also
applies to sales of certain electricity or energy produced by such products.
This bill expands the exemption to apply to solar power systems, wind energy systems, and
waste energy systems, as specified in the bill. This includes electrical or heat energy. Also, it
includes tangible personal property sold with the system that is used primarily to store or
facilitate the storage of the electrical or heat energy produced by the system. Under the bill
systems must be capable of continuously producing required output, and energy production
must be directly from sun, wind, or gas generated as specified above.
4
The Administration estimates that these modifications under the bill would decrease state tax
revenues by $1.7 million in 2023-24 and $2.5 million in 2024-25 and annually thereafter.
2
2023 Spill Draft LRB-0723/P3 (WHEDA headquarters).
3
2023 Spill Draft LRB-0776/P1 (gender-neutral references).
4 2023 Spill Draft LRB-0820/P1 (exemption for energy systems). - 3 -
Prairie and Wetland Counseling
Current law imposes a sales and use tax on retail sales of landscaping and lawn maintenance
services. The bill excludes from taxable landscaping services the planning and counseling
services for the restoration, reclamation, or revitalization of prairie, savanna, or wetlands if
provided for a separate and optional fee distinct from other services. The provision would take
effect on the first day of the third month beginning after publication.
5
The Administration estimates that the exemption would reduce state tax revenues by $400,000
in 2023-24 and $600,000 in 2024-25 and annually thereafter.
Exemption for Diapers and Feminine Hygiene Products
Current law imposes a sales and use tax on retail sales of tangible personal property. The bill
creates an exemption applicable to sales of diapers and feminine hygiene products.
6
The Administration estimates the exemption would reduce state tax revenues by $13.7 million in
2023-24 and $19.1 million in 2024-25 and annually thereafter.
Repeal of Exemption for Farm-Raised Deer
Current law includes an exemption from the sales and use tax for sales of farm-raised deer to a
person operating a hunting preserve or game farm. The bill repeals the exemption.
7
The Administration estimates would increase state tax revenues by $90,000 in 2023-24 and
$120,000 in 2024-25.
Retirement Income Subtraction
Current law imposes a tax on all net income earned in this state, unless an exemption applies.
There is an exemption for up to $5,000 of payments or distributions received from qualified
retirement plans or certain other retirement accounts, as specified in the statute. The individual
claiming the exemption must be at least 65 years old and have federal adjusted gross income
under $15,000, or under $30,000 if married. Thebill increases the exemption to up to $5,500
of payments or distributions, and it expands the income eligibility to under $30,000 for
individuals, or $60,000 if married. The changes would apply beginning in tax year 2023.
8
The bill’s modifications to the exemption would reduce individual income tax collections by $8.1
million annually, beginning in 2023-24, according to Legislative Fiscal Bureau (LFB) estimates.
Disability Income Subtraction
Current law generally imposes a tax on all net income earned in this state. Individuals may
exclude up to $100 per week (or $5,200 per year) for certain disability payments, as specified in
the statute. For married joint filers, the exclusion applies per disabled spouse. The exclusion
begins to phase out, on a dollar-for-dollar basis, after the federal adjusted gross income (AGI)
exceeds $15,000. It is eliminated for those with AGI above $20,200 for individuals, or $25,400
for married joint filers if both spouses are disabled.
5
2023 Spill Draft LRB-0821/P1 (prairie and wetlands counseling).
6
2023 Spill Draft LRB-0996/P2 (diapers and feminine hygiene products).
7
2023 Spill Draft LRB-1001/P1 (farm-raised deer).
8 2023 Spill Draft LRB-1234/P2 (retirement income subtraction). - 4 -
Thebill increases the exemption to up to $5,500 per year (per disabled spouse if a married joint-
filer) of such payments or distributions. And it expands the income eligibility to those with AGI
less than: (a) $30,000 for single and head-of-household filers; (b) $60,000 for married-joint
filers; or (c) if a married-separate filer, $60,000 of total income combined for both spouses. The
phase-out is eliminated, so that above those thresholds there is no exclusion.
9
The bill’s modifications to the exemption would reduce individual income tax collections by an
estimated $260,000 annually, according to LFB estimates.
Internal Revenue Code (IRC) Update
Tax Cuts and Jobs Act of 2017 (TCJA)-Related Provisions
The bill updates state-law references to the federal IRC under the individual income and
corporate income and franchise taxes to adopt certain TCJA provisions, as amended by
subsequent federal legislation, for taxable years beginning after December 31, 2022. The bill
adopts the following TCJA items: (a) loss limitation for taxpayers other than corporations; (b)
accounting rules for accrual method taxpayers; (c) limitation on the deduction for business
interest; (d) limitation on the deduction for entertainment, amusement, and recreation
expenses; (e) limitation on the deduction of FDIC premiums; and (f) modification of the
limitation on the deduction for highly paid individuals.
10
TCJA Provision as Amended and Fiscal Effect (Millions) 2023-24 2024-25
Loss limitation for taxpayers other than corporations $51.3 $48.0
Accounting rules for accrual method taxpayers 3.6 3.3
Limitation on the deduction for business interest 109.6 123.2
Limitation on the deduction for entertainment, amusement, and recreation 14.1 15.0
Limitationon the deduction ofFDICpremiums 5.9 6.1
Modificationof the limitation on the deduction for highly paid individuals3.5 3.6
TOTAL $188.0 $199.2
According to the Administration, and as shown in the table above, the state’s adoption of these
provisions would increase state income and franchise tax revenues by $188 million in 2023-24
and $199.2 million in 2024-25.
Federal Legislation Enacted in 2021-2022
The bill also updates state-law references to the IRC under the individual income and corporate
income and franchise taxes to conform to the provisions included in the following federal
legislation enacted in 2021 and 2022:
American Rescue Plan Act of 2021.
Paycheck Protection Program Extension Act of 2021.
Surface Transportation Extension Act of 2021.
Further Transportation Extension Act of 2021.
9
2023 Spill Draft LRB-1235/P2 (disability income subtraction).
10
2023 Spill Draft LRB-1244/P2 (IRC update). - 5 -
Infrastructure Investment and Jobs Act.
Consolidated Appropriations Act of 2022.
Supreme Court Security Funding Act of 2022.
Inflation Reduction Act of 2022.
According to the Administration, the state’s adoption of these provisions would reduce state
income and franchise tax revenues by $400,000 in 2023-24; however, it would increase state
revenues by $1.4 million in 2024-25.
Net Operating Loss Carryback
Current law allows an individual to carry back a net operating loss to the two prior taxable years
in order to reduce the amount of income subject to state income tax in those years. The bill
repeals this exemption, beginning in taxable years after December 31, 2022.
11
This provision would increase individual income tax collections by $2.9 million in 2023-24 and
by $1.5 million in 2024-25, according to estimates. However, the LFB indicates that over time
the revenue gain from the elimination of loss carrybacks would be offset by the revenue loss due
to larger amounts of loss carry forwards.
Limitation on Capital Gains Exclusion
Current law allows individuals, when computing their income for state tax purposes, to subtract
30 percent of the net capital gains realized from the sale of certain assets, or 60 percent for
certain farm assets. Under this bill, an individual may not make the 30 percent subtraction for
AGI exceeding $400,000 for a single individual or head of household filer; $533,000 for a
married couple who files jointly; or $266,500 for a married individual who files separately. The
bill creates an exception for individuals whose AGI, after subtracting 30 percent of net capital
gains from nonfarm assets, is below the threshold amount. These individuals may make an
alternate subtraction as specified in the bill. The limitation on capital gains exclusions under the
bill applies to taxable years beginning after December 31, 2022.
12
The capital gains exclusion limitation would increase income tax collections by $185.2 million in
2023-24, and $154.2 million in 2024-25 and annually thereafter, according to LFB estimates.
First-Time Homebuyer Account Deduction
The bill creates a tax-advantage first-time home buyer savings account. The bill authorizes the
holder of the account, when calculating income for state tax purposes, to subtract deposits made
into the account during the year, as well as interest and gains that are redeposited into the
account. Up to $5,000 of deposits may be subtracted per account, per year, for individuals, or
up to $10,000 for married couples filing a joint return. Over all taxable years, the account holder
may not subtract more than $50,000 of deposits into any account for each beneficiary.
With limited exceptions, the bill provides that if an amount is withdrawn from the account for
any reason other than paying the home purchase down payment and closing costs incurred by a
beneficiary designated by the account holder, then the account holder is subject to a 10 percent
11
2023 Spill Draft LRB-1322/P1 (net operating loss carryback).
12
2023 Spill Draft LRB-1323/P1 (limitation on capital gains exclusion). - 6 -
penalty tax on the withdrawal and must include the amount of the withdrawal in income for
state tax purposes. The bill provides that the account beneficiary must be a Wisconsin resident
who has not owned a single-family residence during the 36 months prior to the purchase. The
bill’s provisions relating to the first-time homebuyer account deduction apply to taxable years
beginning after December 31, 2022.
13
The Administration estimates the provisions relating to the first-time homebuyer account
deduction would reduce estimated individual income tax collections by a minimal amount in
2023-24; $4.8 million in 2024-25; $6.6 million in 2025-26; and $7.5 million in 2026-27 and
annually thereafter.
Dividends Received Deduction Limitation
Current law allows corporations to deduct dividends received from related corporations when
calculating income for state tax purposes, in certain cases, as specified in the statutes. Current
law also allows businesses to carry forward net business losses to future taxable years to offset
income in those years. The bill provides that the deduction for dividends received may not be
taken into account when determining whether a corporation has a net business loss that may be
carried forward, beginning in taxable years after December 31, 2022.
14
This provision would increase corporate income and franchise tax revenues by $3.2 million
annually, beginning in 2023-24, according to LFB estimates.
Private School Tuition Deduction
Current law allows individuals, when computing their income for state tax purposes, to subtract
a portion of the tuition paid during the year to send a child who is a dependent of the individual
to private school. The maximum deduction is $4,000 for an elementary school pupil and
$10,000 for a secondary school pupil. The bill provides that individuals only may claim the
deduction for private school tuition with AGI below $100,000 for single individuals and heads
of household; $150,000 for married couples filing jointly; and $75,000 for married individuals
filing separately.
15
The bill’s limitation on the tuition deduction would increase individual income tax collections by
an estimated $6.5 million in 2023-24, and annually thereafter, according to LFB estimates.
Exemption for Gun Safety Items
Current law imposes a sales and use tax on retail sales of tangible personal property. The bill
creates an exemption applicable to sales of gun safes, trigger locks, and gun barrel locks. The
provision would take effect on the first day of the third month beginning after publication.
16
The Administration estimates that this exemption would reduce state tax revenues by $230,000
in 2023-24 and $310,000 in 2024-25 and annually thereafter.
13
2023 Spill Draft LRB-1516/P1 (first-time homebuyer account deduction).
14
2023 Spill Draft LRB-1523/P1 (dividends received deduction limitation).
15
2023 Spill Draft LRB-1547/P1 (private school tuition deduction).
16
2023 Spill Draft LRB-1611/P2 (exemption for gun safety items). - 7 -
Exemption for Breastfeeding Equipment
Current law imposes a sales and use tax on retail sales of tangible personal property. The bill
creates an exemption applicable to the sales price from the sale of and the storage, use, or other
consumption of breast pumps, breast pump kits, and breast pump storage and collection
supplies.
17
The Administration estimates that the exemption for breastfeeding equipment and
supplies would reduce state tax revenues by $510,000 in 2023-24 and $680,000 in 2024-25
and annually thereafter.
Cranberry Research Station
Current law imposes a tax on all general property in this state, unless an exemption applies, as
specified in the statutes. The bill creates an exemption for all property, not exceeding 50 acres of
land, owned or leased by a tax-exempt entity that is used primarily for research and educational
activities associated with commercial cranberry production. The exemption would first apply to
tax assessments as of January 1, 2024.
18
This exemption would apply to the Wisconsin Cranberry Research Station, owned by the
Wisconsin Cranberry Research and Education Foundation and located in the Town of
Manchester in Jackson County. The exemption would result in the tax currently levied on this
property being shifted to other properties within the taxing jurisdictions in which the Research
Station is located.
Personal Property Tax Repeal
Under current law, machinery, tools, and patterns, not including those used in manufacturing,
are exempt from the personal property tax. This exemption became effective beginning with
property tax assessments as of January 1, 2018. Beginning in 2019, the state pays each taxing
jurisdiction annually an amount equal to the taxes that were levied on such items of personal
property based on assessments as of January 1, 2017. Also, certain public utilities, including
railroad companies, generally are subject to an ad valorem tax on the market value of their real
and personal property, based on the statewide average property tax rate, in lieu of local property
taxes or assessments. Railroad utility tax revenue is deposited in the transportation fund.
Beginning with property tax assessments as of January 1, 2024, the bill expands the exemption
from the personal property tax to apply to all items defined as “personal property” under the
statutes, including steam and other vessels, furniture, and equipment (other than items
redefined as real property under the bill, and heat, power, and light property subject to local
assessment). Beginning in 2025, the bill requires the state to pay each taxing jurisdiction
annually an amount equal to the taxes that were levied on such items of personal property based
on assessments as of January 1, 2023. Beginning in 2026, each taxing jurisdiction will receive a
payment to compensate it for its loss in personal property revenue equal to the payment it
received in the previous year; however, the bill requires that this amount must be increased by
the annual percentage change in the consumer price index.
19
The bill also provides that for assessments after January 1, 2024, the personal property of a
railroad company is exempt from state ad valorem tax, and from local assessment and taxation,
17
2023 Spill Draft LRB-1625/P3 (breastfeeding equipment).
18
2023 Spill Draft LRB-1645/P1 (cranberry research station).
19
2023 Spill Draft LRB-1739/P3 (personal property tax repeal). - 8 -
to comply with the federal Railroad Revitalization and Regulatory Reform Act; and on
December 30, 2024, DOA must transfer $9 million from the general fund to the transportation
fund to account for the exemption. On December 30, 2025, and each December 30 thereafter,
DOA must transfer from the general fund to the transportation fund an amount equal to the
amount transferred in the previous year increased by 1.25%.
It is estimated that the bill’s provisions relating to the repeal of the personal property tax, as
described above, would have an overall fiscal effect of $212,895,800 in the upcoming fiscal
biennium, comprised as follows:
The bill will result in payments of $202.4 million to taxing jurisdictions, equal to taxes levied
on personal property exempted under the bill based on assessments as of January 1, 2023;
and similar payments, with adjustments as described above, in future years.
The bill will result in a transfer of $9 million from the general fund to the transportation
fund, on December 30, 2024, and similar transfers, with adjustments as described above, on
December 30 in future years.
DOR estimates there will be a cost of $1,495,800 to implement and administer the expanded
exemption from personal property tax under the bill. This includes ongoing funding of
$20,600 per year for trainings and reviews, and the remaining balance would represent
onetime costs of updating DOR computer systems and applications.
Professional Baseball District
Current law creates a professional baseball park district in each county with a population of at
least 600,000 and all counties that are contiguous to that county. Current law also provides a
property tax exemption applicable to sports and entertainment home stadiums and any
functionally related or auxiliary facilities, as specified in the statutes. And current law provides a
sales and use tax exemption for sales, storage, use, or other consumption of building materials,
supplies and equipment for the construction, renovation or development of any property that is
a sports and entertainment home stadium exempt from the property tax.
The bill expands the exemption from property taxation applicable to sports and entertainment
home stadiums to include any other property constituting a baseball park development built or
used by a professional athletic team, beginning with tax assessments as of January 1, 2024. Also,
the bill expands the sales and use tax exemption for construction, renovation or development of
a tax-exempt sports and entertainment home stadium to include improvement, repair, and
maintenance of such facilities and structures. Finally, the bill creates a sales and use tax
exemption applicable to tangible personal property and taxable services sold to a local
professional baseball park district, in addition to making other changes to relating professional
baseball park districts.
20
For purposes of the property tax exemption described above, the bill defines a “baseball park
development” as property, other than baseball park facilities, tangible or intangible, operated by
a professional baseball team on real estate leased or subleased from a district that is part of the
operations of the professional baseball team for any legally permissible use, including retail
facilities, hospitality facilities, commercial and residential facilities, health care facilities, and
any other functionally related or auxiliary facilities or structures.
20
2023 Spill Draft LRB-1940/P7 (professional baseball district). - 9 -
The expansion of the current property tax exemption to include property constituting a baseball
park development, as described above, would result in the tax currently levied on that property
being shifted to other properties within the taxing jurisdictions in which it is located.
With respect to the sales and use tax exemption for construction, renovation or development of
a tax-exempt sports and entertainment home stadium, the Administration estimates that the
expansion of the exemption to include improvement, repair, and maintenance would have a
minimal effect on general fund tax collections. Also, the Administration estimates that the
creation of a sales and use tax exemption for sales to a local professional baseball park district
would have a minimal effect on general fund tax collections.
LEGALITYINVOLVED
There are no questions of legality involving the tax exemption related provisions in the bill.
PUBLICPOLICYINVOLVED
The Joint Survey Committee on Tax Exemptions finds the following tax exemption related
provisions are appropriate public policy:Cranberry research station property tax
exemption andPersonal Property Tax Repeal, on a vote of Ayes, 9; Noes, 0.
The Joint Survey Committee on Tax Exemptions finds the following tax exemption related
provisions are appropriate public policy:Marijuana legalization, WHEDA headquarters,
Gender-neutral statutory references, Energy systems, Prairie & wetland
counseling services, Diapers and feminine hygiene products, Farm-raised deer,
Retirement income exclusion, Disability income exclusion, Internal Revenue Code
Update, Net operating loss carryback repeal, Capital gains exclusion limitation,
First-time homebuyer account tax deduction, Dividends received deduction
limitation, Exemption for gun safety items, Exemption for breastfeeding
equipment,and Baseball park district, on a vote of Ayes, 5; Noes, 4.
06/27/23 JOINT SURVEY COMMITTEE ON TAX EXEMPTIONS